Corporation Tax: 'If we blow this opportunity then we will live to regret it'
A unique chance to regenerate Northern Ireland's economy by cutting corporation tax must not be blown, a leading businessman has warned MLAs.
The region will live to regret it if business tax rates are maintained and other stimulus measures not introduced, Wrightbus managing director Mark Nodder said.
In an impassioned address to the Assembly's finance and personnel committee, the senior executive at the Ballymena manufacturer recalled how Northern Ireland once struggled to attract investors due to the Troubles.
"That has all now turned around," he said. "There's such a fantastic story to tell. People are anxious to come here and see it for themselves.
"And from a businessman who believes passionately in what this little country has to offer, I just feel there's a sense that this is our time, and that if we blow this opportunity then we will all live to regret this."
Mr Nodder was giving evidence on the proposed tax cut to the committee in his role as a member of the Government-established business and finance panel, the Economic Advisory Group.
Group chairman Kate Barker also fielded committee questions.
Business leaders have backed the move to reduce the rate from 26% to something closer to the 12.5% in the Republic of Ireland, amid claims it would generate 4,500 new jobs a year.
But others, including unions, are opposed as it could only be delivered with an accompanying cut to public funding - as much as £400m - from the Treasury. The UK Government has not yet signalled whether it will hand Stormont the powers to set its own corporate levy and is awaiting the outcome of a public consultation exercise.
Mr Nodder said a lot of momentum had been created by the efforts of the US administration to generate interest among stateside investors.
He stressed that a cut would need to be accompanied by other measures such as increased investment in training and upskilling the workforce.
Ms Barker was equally enthusiastic about lowering the rate.
She said the panel of business experts had examined a range of stimulus measures but none would be as effective as reducing the levy.
‘One size fits all’ no longer fits everyone
By John Whiting
One key difference between the UK's tax system and that operated by many other countries is its uniformity. We have a national system which operates in the same way and at the same rate, no matter where you are. That has its plus and minus points: simpler administration, but less chance to change the system to suit local needs and wishes.
It seems that the UK's ‘one size fits all' system is beginning to break down. Scotland is leading the way with the product of the Calman review, bringing Scotland the power to make significant changes to its main rate of income tax and devolving various other taxes such as stamp duty land tax. The aim is in many ways to give the Scottish government power, but also responsibility: Holyrood becomes a tax-raising body, not just a spending one. Wales may be heading the same way with its Holtham review, and of course here in Northern Ireland we are calling for local power over corporation tax. Our lead is now being picked up in Scotland.
There is another dimension. The European Commission is keen to harmonise corporation tax and is working towards a ‘Common Consolidated Corporate Tax Base' to calculate taxable profits across the EU. The UK is not keen on the idea, but the EC says tax rates would still be set locally. Could that, paradoxically, help us call for power to set our own rates?
John Whiting is tax policy director of the Chartered Institute of Taxation
Business tax cut critical: Sir Anthony
By Victoria O’Hara
Reducing corporation tax in Northern Ireland is “absolutely critical” for the future success of our economy and businesses, according to the former CEO of Independent News and Media, Sir Anthony O'Reilly.
Sir Anthony made the comments last night ahead of a dinner organised by INM, owners of the Belfast Telegraph, for business leaders at Hillsborough Castle.
Secretary of State for Northern Ireland Owen Paterson was among guests at the event.
Sir Anthony said: “I think it is absolutely critical. The dependence of the economy in great measure is on the public sector here and that inevitably may go down. So a reduction in corporation tax is an idea which would make all of the island of Ireland location indifferent, so to speak.”
Will neighbours glance jealously over the fence at our special treatment?
It is often claimed that Northern Ireland is a ‘special case’ and deserves a lower rate of corporation tax to offset years of deprivation and lack of investment caused by the Troubles. But will neighbouring regions understand why Northern Ireland could be getting extra assistance to help it out of an economic black hole?
A Westminster committee said there was a “convincing case” for cutting corporation tax in Northern Ireland. The MPs said the decision to vary the rate must be the responsibility of the Northern Ireland Executive, with receipts for corporation tax raised in the region kept here.
The committee has recommended that the Westminster and Stormont administrations work together to produce a clear, single package of incentives for Northern Ireland.
While initially the Scottish First Minister Alex Salmond was opposed to Northern Ireland being able to cut its corporation tax rate, he now seems to be in favour — but as long as his own country can follow suit.
Mr Salmond said recently: “There has already been support from the Secretary of State for Northern Ireland and the all-party Scotland Bill Committee of the last Scottish Parliament noted that if Northern Ireland gets to decide on corporation tax, then so must Scotland.”
But Scotland has been warned that if corporation tax gets the go-ahead the cost could be significantly more than it would in Northern Ireland, as much as £1.5bn.
Like Scotland, Wales would also prefer a slice of the low corporation tax benefit if Northern Ireland gets the go-ahead to devolve tax powers.
A Welsh Government spokesman said: “We are aware that the UK Government is considering devolving powers over corporation tax to Northern Ireland.
“If the UK Government does propose to devolve corporation tax powers to one or more of the devolved administrations, it should make a similar offer to Wales.”
The corporation tax issue is due to be debated in the Welsh Assembly early next week.
REPUBLIC OF IRELAND
Despite threats of increased competition for foreign direct investment, the Republic of Ireland seem to be in favour of Northern Ireland dropping its rate from 26% to meet its own, set at 12.5%.
Taoiseach Enda Kenny said: “We in government here would be very supportive of a reduction in the corporation tax rate, equivalent to our own, in Northern Ireland.”